A New Congress, A New Pledge and the Coming Budget Debate

Washington gets back to work this week, as the 112^th Congress convenes with over 100 new members between the House and Senate. Amid the pomp and circumstance, John Boehner (R-O) will take the gavel from Nancy Pelosi (D-CA) and become the 55^th Speaker of the House. Yet, it’s the agenda of the 112^th Congress that is of most interest to the majority of Americans.

Pledge to America

On September 23, 2010, House Republicans unveiled the “Pledge to America.” Designed to draw on the previous success of the “Contract with America,” which former House Speaker Newt Gingrich and company rode to victory in 1994, the ‘Pledge’ never received either the media coverage, nor popular understanding, to the same extent as the ‘Contract.’ The difference, at least in part, between the ‘Pledge’ and the ‘Contract’ lay in their relative specificity. The ‘Contract’ set forth 8 specific legislative items Republicans promised to pass on the first day of their majority, if elected. In contrast, the ‘Pledge’ largely set forth broad themes (some would say broad campaign-based themes) Republicans promised to govern by, if elected. Here’s a refresher for anyone not familiar with either (or both):

2010: Pledge to America:

· Extending the temporary tax cuts passed under President George W. Bush in 2001 and 2003 for all taxpayers, including those for those earning over $200,000 ($250,000 for married couples).

· A tax deduction for small businesses on up to 20 percent of their business income.

· A hold on all unspent funds authorized as part of 2009's stimulus bill or the 2008 TARP legislation.

· Roll back government spending to 2008 levels, to save $100 billion while exempting "seniors, veterans, and our troops" from cuts; this would entail cutting 21 percent of the $477 billion budgeted for domestic discretionary spending.

· A hiring freeze on all federal agencies except those necessary to national security.

· A repeal of the 2010 health-care reform bill.

· Reform of medical liability and health insurance practices.

· A permanent ban on any federal funding for abortions.

· Honoring traditional marriage between a man and a woman^[5].

· A requirement that Congress post all bills online three days before a vote.

· A requirement that lawmakers cite the specific constitutional authority that enables the legislation.

· A ban on trials on U.S. soil for detainees currently held at Guantanamo Bay.

1994: Contract with America

1. Require all laws that apply to the rest of the country also apply to Congress;

2. Select a major, independent auditing firm to conduct a comprehensive audit of Congress for waste, fraud or abuse;

3. Cut the number of House committees, and cut committee staff by one-third;

4. Limit the terms of all committee chairs;

5. Ban the casting of proxy votes in committee;

6. Require committee meetings to be open to the public;

7. Require a three-fifths majority vote to pass a tax increase;

8. Guarantee an honest accounting of the Federal Budget by implementing zero base-line budgeting.

What to Look For:

While it will be interesting to see how often, if at all, the Republicans refer back to the ‘Pledge’ in the coming months, the real focus will be on spending. During the lame duck session of the 111^th Congress, a Continuing Resolution (CR) was passed to keep the federal government funded until March 4, 2011. (As you may know, the federal government works on a fiscal year, running from October 1^st through September 30^th.) A CR provides funding for departments and programs at the previous year’s level until a true budget is passed. In short, the federal government is technically without a budget for Fiscal Year 2011 at present, and assuming a FY 2011 budget is passed by March 4^th, essentially half the fiscal year will be over once the budget is passed.

Spending in FY 2010 was slightly more than $3.5 Trillion. The ‘Pledge’ calls for a spending rollback to FY 2008 levels. In FY 2008, the federal government spent approximately $2.9 Trillion. Cutting $600 Billion from the federal budget between now and March 4^th is too ambitious for any party, in practical terms. As such, look for House Republicans to go after the low hanging, symbolic budgetary fruit as they craft a budget for FY 2011. Cutting the House’s own budget and eliminating authority to spend unspent Stimulus (American Recovery and Reinvestment Act) and TARP funds will be easy targets and at the top of their list for FY 2011. In all, relatively small cuts amounting to $50 to $75 Billion are realistic.

And, we must not forget their attempts to repeal, or defund, health care reform. These votes will happen, and they may well pass the House. The reality is that they have no chance of passing the Democratic controlled Senate, and even if they somehow did, the President would quickly veto the legislation. In short, at least for now, the attempts to repeal or defund health care reform are part of Washington’s political theatre, rather than real budget reform.

Instead, pay attention to FY 2012. FY 2012 begins on October 1, 2011. In fairness to Republicans, it will be the first budget they will truly be able to shape. It will be here that America will find out just how true Republicans intend to adhere to their fiscal conservative roots. Will they cut defense? Will they cut Medicare/Medicaid? Will they propose to restructure the federal government to reduce its size? All of these questions are serious matters that must be addressed, regardless of political affiliation. Instead, look for the real debate to begin this summer, as it will lay the foundation for America’s fiscal future, as well as the 2012 presidential campaign.